Cost-Cutting, Trucks Boost Ford’s Profit
Ford Motor Co. said Wednesday that its third-quarter earnings rose 11% as it cut costs and as North American demand for its high-profit light trucks overcame slumping sales worldwide.
The world’s No. 2 auto maker said net income rose to $1 billion, or 80 cents a share, from $906 million, or 73 cents, before a gain in the year-earlier quarter. Analysts expected earnings of 79 cents a share, the average estimate in a First Call Corp. survey. Revenue fell 9.6% to $32.6 billion.
Ford trimmed $600 million in fat in the latest quarter. In the first nine months of this year, it has saved $1.9 billion, well ahead of its $1-billion target for all of 1998.
The savings have come through the retooling of plants to make them more efficient, employing fewer workers, lower costs for raw materials, reduced warranty expenses and relentless pressure on parts suppliers.
“Ford has exceeded its own aggressive expectations on cost-cutting,” said analyst Michael Ward of PaineWebber Inc. “In the auto industry, that’s very difficult to do.”
Ford shares rose $1.75 to close at $45.81 on the New York Stock Exchange.
The savings offset higher incentive expenses and dismal sales in Europe and South America.
Lower costs were vital for Ford in the quarter, as profit rose while its total number of cars and trucks sold fell 6.7%.
The company’s U.S. market share rose slightly to 19.5% in the quarter from 19.4% a year ago, partly reflecting the scrapping of several unprofitable cars, including the Thunderbird.
While Ford doesn’t disclose per-unit rebate figures, its overall marketing costs as a percentage of U.S. revenue totaled 10.2% in the third quarter, up from 8.3% in the year-ago period.
The company expects fourth-quarter profit to exceed the $1.27 a share it earned a year earlier, Chief Financial Officer John Devine said. Analysts had expected Ford to earn $1.22 a share in the fourth quarter.
The earnings report comes less than a week after Ford named a new vice chairman and made other management changes as William Clay Ford Jr. and Jacques Nasser prepare to take control of the company at the start of next year.
GM on Tuesday reported a smaller-than-expected loss for the quarter as cost cuts tempered the effects of two summer strikes and an overseas sales slump. Chrysler on Monday reported net income of $682 million, or $1.02 a share, exceeding analysts’ expectations.
*
MORE EARNINGS: C1, C2
